House Approves Passage of Michigan Sales Tax Bills

The House of Representatives’ Tax Policy committee met Wednesday, June 14, and voted to recommend passage of Senate Bills 94 and 95 to the committee of the whole. The passage of these bills will allow for full credit of the trade-in value against the purchase of a new or used vehicle, requiring a customer to only pay sales tax on the difference between the trade-in value and the agreed upon price of the new or used vehicle.

In 2014, a law went into effect allowing the roll-up sales tax on the differences before dealers could give full credit for the value of a trade-in against the cost of a new vehicle that the consumer was buying.

For example, if a consumer comes in with a $200,000 motorhome and gets $100,000 in trade-in value, that value is applied to the $200,000. In Michigan, customers would have to pay 6 percent tax on the $100,000 difference. Currently, it’s only up to $5,000.

“About 40 states already have sales tax on the difference,” Bill Sheffer, executive director of MARVAC, told RV PRO. “Right now, if you buy a $200,000 motorhome in the state of Michigan, if you buy it outright, you’re paying $12,000 in sales tax.”

MARVAC dealers have been working on getting the passage of Senate Bills 94 and 95 for a couple years. Now they should know before September if it will get passed. “This will apply for cars and trucks too, but they’re not going to get the full effect of what the RV industry is.

The next steps will be a vote of the House of Representatives for passage and, if passed, the bill will pass to the Michigan governor for his signature. The new law, if passed, would go into effect beginning January 1, 2018.